FHA Loans - Fort Lauderdale
Cash and FHA are King in the Fort Lauderdale Housing Market. It's amazing how many home buyers are in a position to go pay cash for a house but for everybody else FHA with 3.5% down is the most widely used loan program that is available.
Looking at a graph provided by Zillow.com we can see that home prices are edging upward in all of the various price ranges in Fort Lauderdale. Many realtors are reporting a lack of inventory for their clients. In fact many realtors are reporting that they are paying a premium with their offers. In other words if a list price is $200,000 they are making offers of $210,000 or $220,000 with the buyer picking up the difference.
As home prices continue to climb, I am hearing many customers complain that home prices are quickly becoming unaffordable again. From an FHA standpoint underwriters like to keep track of two ratios, the front and the back ratio.
The Front ratio is your gross income vs your total housing payment, This ratio is income before taxes vs your principle, interest, taxes and insurance and if there is any homeowners dues in your neighborhood. Ideally FHA likes to see this ratio at 28% of total gross household income.
The Back ratio is your gross income versus your total housing payment plus all of your debt. All of your debt includes things like credit cards and car loan payments, student loans, furniture loans etc. ideally FHA likes to see this ratio at 38% of gross income.
NAR, or the National Association of Realtors has introduced yet another measure that we can use to convince ourself we are in the right price range. It is called the Affordability Index. See the graph below.
An affordability index is most often associated with housing costs. Housing affordability indexes often compare the cost of purchasing a home in different lacations. Points above 100 indicate that a typical family will be less likely to qualify for a mortgage on a home in the area, while a value of 100 indicates that the typical family can just barely afford to live there. To read more about the affordability index go here
To me this is the national association of Realtors way of reminding us that eventhough prices are starting to sky-rocket again, you can still afford that house. If you look at the graph you can see where home prices were out of control during the frenzy in 2005-2006 and now we are enjoying extremely discounted prices and extremely low borrowing costs which make this index at an all time low.
Another way to take into account your affordability index is to take into account transportation costs going to an from work. According to NAR, factoring in gas and transportation expenses, ideally a customer would like to keep their affordability index under 45% of the household budget.
Living in Fort Lauderdale typically does not involve a long commute. Living in rural West Palm beach or rural St Lucie allow for lower home prices but much longer commutes.
To Learn more about the typical processing guidelines and minimum down requirement please visit my FHA Financing Page
Or to learn more about trends in home prices in Fort Lauderdale visit my Fort Lauderdale Mortgage Banker page